Course Introduction
Business Accounting
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Business Accounting introduces students to the foundational principles and practices of accounting as they apply to business organizations. The course covers essential topics such as the accounting cycle, double-entry bookkeeping, preparation and analysis of financial statements, and an overview of accounting systems and controls. Students learn to interpret financial information, understand regulatory frameworks, and apply ethical standards in accounting. By developing these skills, students gain a solid understanding of how accounting informs business decision-making, supports organizational objectives, and meets legal and stakeholder requirements.
Recommended Textbook
Horngrens Accounting 10th Edition by Miller Nobles Mattison
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Page 2
Chapter 1: Accounting and the Business Environment
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Sample Questions
Q1) Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?
A)Securities and Exchange Commission (SEC)
B)Public Company Accounting Oversight Board (PCAOB)
C)Financial Accounting Standards Board (FASB)
D)American Institute of Certified Public Accountants (AICPA)
Answer: A
Q2) Managerial accounting focuses on information for external decision makers.
A)True
B)False
Answer: False
Q3) The statement of owner's equity shows the changes in Owner's capital. Which one of these statements is true?
A)Decreases in Owner's equity result from additional owner investments.
B)Decreases in Owner's equity result from net losses.
C)Decreases in Owner's equity result from net income.
D)Decreases in Owner's equity result from revenues earned.
Answer: B
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3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) For Revenues, the category of account and its normal balance is:
A)owner's equity and a credit balance.
B)assets and a debit balance.
C)assets and a credit balance.
D)owner's equity and a debit balance.
Answer: A
Q2) Mitchell Florists reported assets of $1,000 and equity of $350. What is Mitchell's debt ratio?
A)65%
B)35%
C)100%
D)70%
Answer: A
Q3) The higher the debt ratio, the lower the risk.
A)True
B)False
Answer: False
Q4) A business purchased land for $250,000 cash. Provide the journal entry (debits first, credits second.)
Answer: 11ea8243_0ff7_f722_bbd8_97ff37273226_TB2803_00 Purchased land for cash.
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) On July 1, Alpha Company prepaid rent for a small equipment storage area. They paid $20,000 to rent the area for the period of July 1 through the end of the year. Provide the journal entry needed on July 1 when the payment is made. Assume the prepaid expense is initially recorded as an asset.
Answer: 11ea8243_1005_3db5_bbd8_c1ebf9e085b7_TB2803_00
Q2) The sum of all the depreciation expense recorded to date for a depreciable asset is called residual value.
A)True
B)False
Answer: False
Q3) In the case of a prepaid expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the prepaid expense was initially recorded as an asset. A)True
B)False
Answer: False
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) Net income (loss)is the difference between the total debits and the total credits in the income statement columns of the worksheet.
A)True
B)False
Q2) Only temporary accounts appear on the post-closing trial balance.
A)True
B)False
Q3) The assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called:
A)long-term assets.
B)long-term liabilities.
C)current assets.
D)current liabilities.
Q4) Which of the following would be considered a long-term asset?
A)Accounts Payable
B)Land
C)Cash
D)Owner's Name, Capital
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6
Chapter 5: Merchandising Operations
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Sample Questions
Q1) The discount amount is calculated on the amount of the invoice minus the returns and allowances.
A)True
B)False
Q2) Under the periodic inventory system, purchases, purchase discounts, and purchase returns and allowances are recorded in the Merchandise Inventory account as and when they occur.
A)True
B)False
Q3) An invoice is also known as a bill.
A)True
B)False
Q4) A wholesaler is a merchandiser who buys merchandise from a manufacturer and sells the same to a retailer.
A)True
B)False
Q5) Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.
A)True
B)False
Page 7
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Chapter 6: Merchandise Inventory
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Sample
Questions
Q1) The materiality concept states that a company must:
A)report only such information that enhances the financial position of the company.
B)perform strictly proper accounting only for significant items.
C)report enough information for outsiders to make knowledgeable decisions about the company.
D)use the same accounting methods and procedures from period to period.
Q2) An overstatement of ending merchandise inventory in the current period results in an overstatement of cost of goods sold in the current period.
A)True
B)False
Q3) Under GAAP, which of the following amounts would be reported as Merchandise Inventory on the balance sheet of a company if the cost of an item is $85 and the current replacement cost is $70?
A)$155
B)The average of $70 and $85
C)$85
D)$70
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Chapter 7: Accounting Information Systems
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Sample Questions
Q1) Hexa Corporation sold a product on credit for $2,235 to Merin. The cost of goods sold was $1,324. Assuming that the firm is following a perpetual inventory system and using a sales journal, it will record $2,235 in the:
A)Accounts Receivable CR, Sales Revenue DR column.
B)Cost of Goods Sold DR, Merchandise Inventory CR column.
C)Merchandise Inventory DR, Cost of Goods Sold CR column.
D)Accounts Receivable DR, Sales Revenue CR column.
Q2) Tangent Corporation makes a $1,200 purchase of merchandise inventory for cash. This transaction will be recorded in the:
A)cash payments journal.
B)general journal.
C)cash receipts journal.
D)purchase journal.
Q3) Which of the following is true of a sales journal?
A)It is a special journal used to record all the cash sales.
B)It is used to record the sales of capital assets, such as buildings.
C)It is a special journal used to record credit sales.
D)It is a general journal that is used to record the adjustments in revenue account.
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Which of the following describes the internal control procedure "separation of duties?"
A)Cashiers must not have access to accounting records.
B)External auditors will monitor internal controls.
C)The information system is critical.
D)The invoices and other documents must be pre-numbered.
Q2) The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the ledger. How would this information be included on the bank reconciliation?
A)an addition on the bank side
B)a deduction on the bank side
C)a deduction on the book side
D)an addition on the book side
Q3) Cash is a highly liquid asset, but cash equivalents are not highly liquid assets.
A)True
B)False
Q4) A point-of-sale terminal provides control over cash receipts over the counter.
A)True
B)False
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Chapter 9: Receivables
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Sample Questions
Q1) The percent-of-sales method to compute uncollectible accounts is also known as the balance sheet approach.
A)True
B)False
Q2) Notes receivable represents an undertaking by a debtor to pay a fixed amount along with interest at a certain future date.
A)True
B)False
Q3) A debtor is a party to the transaction who will receive the cash for the transaction at a later date.
A)True
B)False
Q4) Interest rates are generally stated on a monthly basis.
A)True
B)False
Q5) Days' sales in receivables is also known as the collection period.
A)True B)False
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Chapter 10: Plant Assets, Natural Resources, and Intangibles
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Sample Questions
Q1) Residual value is also known as depreciable cost.
A)True
B)False
Q2) The cost principle requires a business to record the assets acquired or services received at their actual cost.
A)True
B)False
Q3) Depreciation is the allocation of a plant asset's cost to expense over the useful life of the asset.
A)True
B)False
Q4) Nobells Inc. has acquired a property that included both land and a building for $500,000. The company paid cash. The company hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $400,000. Journalize the lump-sum purchase.
Q5) The double-declining-balance method is an accelerated method of depreciation.
A)True
B)False
Q6) Give journal entry to record the acquisition of a plant asset for cash.
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) A contingent liability that will probably become an actual liability, and can be reasonably estimated, must be recorded as an expense and a liability.
A)True
B)False
Q2) Which of the following is an example of an estimated probable contingency?
A)FICA tax payable
B)Income tax payable
C)Warranty payable
D)Accounts payable
Q3) FUTA, Federal unemployment compensation tax, is paid by the employer only and is not deducted from an employee's gross pay.
A)True
B)False
Q4) Warranty Expense would be included in the operating expense section of the income statement.
A)True
B)False
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13
Chapter 12: Partnerships
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Sample
Questions
Q1) Adam, Bill, and Charlie are partners. The profit and rule sharing rule between them is 2:5:3, with Bill getting the most and Adam getting the least. The partnership incurs a net loss of $72,000. While closing the Income Summary:
A)Income Summary will be debited for $72,000.
B)Adam, Capital will be debited for $14,400.
C)Adam, Capital will be credited for $36,000.
D)Charlie, Capital will be credited for $36,000.
Q2) In a ________, each partner is not personally liable for the malpractice committed by another partner.
A)general partnership
B)limited liability partnership
C)limited partnership
D)sole proprietorship
Q3) Capital deficiency refers to a partnership's claim against a partner.
A)True
B)False
Q4) Neil and Paul formed a partnership business. During the year, Neil and Paul withdrew $15,000 and $7,000, respectively. Provide the journal entry to close the withdrawals.
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Page 14
Chapter 13: Corporations
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Sample Questions
Q1) Nice International originally issued 100,000 shares of common stock at a price of $20 per share. A year later, they distributed a 10% stock dividend to shareholders. At the time of the stock dividend, the share price had gone up to $24 per share. Which of the following statements is true?
A)Nice will record sales revenues of $200,000.
B)Nice will record a loss of $40,000.
C)Nice will record a gain of $40,000.
D)Nice will record neither a gain nor a loss.
Q2) Which of the following occurs when a corporation's board of directors declares a 10% stock dividend?
A)Retained Earnings will be credited for the new shares times the current market value of the stock.
B)Retained Earnings will be debited for the new shares times the current market value of the stock.
C)Retained Earnings will be debited for the new shares times the par value of the stock.
D)Retained Earnings will be credited for the new shares times the par value of the stock.
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Chapter 14: Long-Term Liabilities
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Sample Questions
Q1) On January 1, 2015, Carter Sales issued $15,000 in bonds for $14,300. They were 8-year bonds with a stated rate of 9%, and pay semiannual interest. Carter Sales uses the straight-line method to amortize the bond discount. After the first interest payment on June 30, 2015, what was the bond carrying amount?
A)$15,000
B)$14,200
C)$14,344
D)$14,400
Q2) Which of the following describes a debenture?
A)a bond that repays principal in installments
B)a bond that gives the bondholder a claim for specific assets if the issuer fails to pay principal or interest
C)a bond that matures at one specified time
D)a bond that is not backed by specific assets
Q3) On January 1, 2015, Paramount Inc. issued long-term notes payable for $50,000. The note will be paid over ten years with payments of $5,000 plus 12% interest due each January 1, beginning January 1, 2016. Prepare the amortization schedule for the first three payments.
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Chapter 15: Investments
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Sample Questions
Q1) Unrealized gains or losses on available-for-sale securities occur when a company:
A)adjusts an asset to fair value but has not yet disposed of the asset.
B)adjusts an asset to fair value when an asset is disposed.
C)adjusts an asset to average value but has not yet disposed of the asset.
D)adjusts an asset to average value when an asset is disposed.
Q2) At the end of each period, trading securities must be adjusted and reported at fair value.
A)True
B)False
Q3) Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee can be:
A)significant interest investments.
B)controlling interest investments.
C)held-to-maturity investments.
D)either trading investments or available-for-sale investments.
Q4) A company that is controlled by another corporation is called a parent company.
A)True
B)False
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Chapter 16: The Statement of Cash Flows
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Sample Questions
Q1) Which of the following is one of the purposes of the statement of cash flows?
A)to predict future Net Income
B)to evaluate management decisions
C)to evaluate the company's earnings per share
D)to predict the growth of a company's assets
Q2) Arturo Sales purchased some equipment for $12,000 by issuing a 6-month Note Payable. This would appear as a separate schedule of the cash flow statement under a section called non-cash investing and financing activities.
A)True
B)False
Q3) Planned investments and cash dividends are deducted from ________ to arrive at free cash flow.
A)net cash provided by operating activities
B)net cash provided by investing activities
C)net cash provided by financing activities
D)net income
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Chapter 17: Financial Statement Analysis
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Sample Questions
Q1) Days' sales in receivables measures the return on average receivables using credit sales.
A)True
B)False
Q2) The audit report is prepared by an internal auditor of a company.
A)True
B)False
Q3) A company, reporting a discontinued operation or an extraordinary item, must report earnings per share also for each of these line items.
A)True
B)False
Q4) Which of the following best describes horizontal analysis?
A)comparing figures from year to year for the same company
B)expressing each figure as a percentage of a budgeted figure
C)comparing a company's financial statements with other companies
D)calculating key ratios to evaluate performance
Q5) The current ratio is a key indicator of a company's ability to pay current liabilities. A)True
B)False
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Chapter 18: Introduction to Managerial Accounting
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Sample Questions
Q1) The cost of goods sold for Frye Manufacturing in 2015 was $233,000. The January 1, 2015, finished goods inventory balance was $31,600, and the December 31, 2015, finished goods inventory balance was $24,200. Calculate the cost of goods manufactured during 2015.
A)$288,800
B)$233,000
C)$225,600
D)$240,400
Q2) Merchandising companies, like service companies, do not have a Cost of Goods Sold account.
A)True
B)False
Q3) In manufacturing, the cost objects are often units of product. A)True
B)False
Q4) The primary activity of manufacturing businesses is to purchase goods from a wholesaler and resell them.
A)True B)False
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Chapter 19: Job Order Costing
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Sample Questions
Q1) Zephyros Corporation had estimated manufacturing overhead costs for the coming year to be $316,000. The total estimated direct labor hours and machine hours for the coming year are 6,000 and 10,000, respectively. Manufacturing overhead costs are allocated based on direct labor hours. What is the predetermined overhead allocation rate?
A)$31.60 per machine hour
B)$19.75 per direct labor hour
C)$52.67 per direct labor hour
D)$39.50 per machine hour
Q2) Manufacturing overhead is allocated by debiting the Work-in-Process Inventory account and crediting the Manufacturing Overhead account.
A)True
B)False
Q3) Which of the following would use a process costing system rather than a job order costing system?
A)a health-care provider
B)a music production studio
C)a paint manufacturer
D)a home remodeling contractor
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Page 21
Chapter 20: Process Costing
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Sample Questions
Q1) In a process costing system, a department's total production costs incurred in a particular period must equal the total costs transferred out of the department.
A)True
B)False
Q2) A production cost report shows only the calculations for the physical flow of products.
A)True
B)False
Q3) Which of the following is used to calculate the number of units accounted for under first-in, first-out (FIFO)method of inventory valuation of process costing?
A)Accounted for = Beginning balance + Started and completed + In process
B)Accounted for = Beginning balance + Started and completed
C)Accounted for = Beginning balance + In process
D)Accounted for = Beginning balance + Amount transferred in
Q4) A production cost report can help managers in identifying the most profitable products.
A)True
B)False
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Chapter 21: Cost-Volume-Profit Analysis
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Sample Questions
Q1) The breakeven point represents the sales volume at which the company's net income is zero.
A)True
B)False
Q2) The amount by which sales can decrease before the company incurs an operating loss is called breakeven point.
A)True
B)False
Q3) Which of the following formulae is the right formula for calculating contribution margin ratio?
A)Contribution margin ratio = Contribution margin + Net sales revenue
B)Contribution margin ratio = Contribution margin ÷ Net sales revenue
C)Contribution margin ratio = Contribution margin × Net sales revenue
D)Contribution margin ratio = Contribution margin - Net sales revenue
Q4) Which of the following is true of absorption costing?
A)the variable manufacturing costs are considered period costs
B)the fixed manufacturing costs are considered period costs
C)both variable and fixed manufacturing costs are considered product costs
D)both variable and fixed manufacturing costs are considered period costs
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Chapter 22: Master Budgets
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Sample Questions
Q1) Which of the following is an example of the benchmarking function of a budget?
A)A budget demands integrated input from different business units and functions.
B)Budgeting requires close cooperation between accountants and operational personnel.
C)Budget figures are used to evaluate the performance of managers.
D)The budget outlines a specific course of action for the coming period.
Q2) Which of the following describes the cash budget?
A)It aids in planning to ensure the company has adequate inventory and cash on hand.
B)It captures the variable and fixed expenses of the business.
C)It depicts the breakdown of sales based on terms of collection.
D)It helps in planning to ensure the business has adequate cash.
Q3) Which of the following statements is true of the capital expenditures budget?
A)It is a part of the financial budget.
B)It must be completed after the budgeted income statement is prepared.
C)It includes the sales budget.
D)It must be completed before the cash budget is prepared.
Q4) A static budget is a financial plan for a particular level of sales volume.
A)True
B)False
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Chapter 23: Flexible Budgets and Standard Cost Systems
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Q1) A company is analyzing its month-end results by comparing it to both static and flexible budgets. During the previous month, the actual variable expenses per unit were lower than the expected variable costs per unit as per the static budget. This difference results in a(n):
A)favorable flexible budget variance for variable expenses.
B)favorable sales volume variance for variable expenses.
C)unfavorable flexible budget variance for variable expenses.
D)unfavorable sales volume variance for variable expenses.
Q2) The production manager of a company was experiencing a high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided to recruit some highly skilled production workers from another company to bring down the defect rate, but was worried that the higher wages of these workers might negatively affect operating income. This situation would have produced a(n):
A)unfavorable direct materials cost variance.
B)unfavorable direct labor cost variance.
C)unfavorable direct labor efficiency variance.
D)unfavorable direct materials efficiency variance.
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Chapter 24: Cost Allocation and Responsibility Accounting
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Sample Questions
Q1) The practice of comparing a company's achievements against the best practices in the industry is known as goal congruence.
A)True
B)False
Q2) In a decentralized company, all the planning and controlling decisions are made by the top management.
A)True
B)False
Q3) Which of the following is an expanded form of calculating return on investment?
A)Profit margin ratio × Asset turnover ratio
B)Net profit ratio × Inventory turnover ratio
C)Gross profit ratio × EVA
D)Asset turnover ratio × inventory turnover ratio
Q4) Which of the following statements is correct regarding the activity-based costing system?
A)It uses separate indirect cost allocation rates for each activity.
B)It is not as accurate or precise as traditional costing systems.
C)It accumulates overhead costs by processing departments.
D)It is less complex and, therefore, less costly than traditional systems.
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Chapter 25: Short-Term Business Decisions
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Sample Questions
Q1) Fixed costs are relevant to a special sales order decision if those fixed costs are subject to change as a result of the special order.
A)True
B)False
Q2) Victory Company makes a special kind of racing tire. Variable costs are $220, and fixed costs are $30,000 per month. Victor sells 500 units per month at a price of $300. If Victory upgrades the quality of the tire, they believe they can boost the price up to $325. If so, the variable cost will go up to $230 and the fixed costs will rise by 40%. If Victory decides to upgrade, how will it affect operating income?
A)Operating income will go down by $1,250.
B)Operating income will go down by $4,500.
C)Operating income will go up by $12,500.
D)Operating income will go up by $7,500.
Q3) When a company is considering the possibility of processing their product further to achieve higher sales revenues, the rule is as follows: if incremental revenues exceed incremental costs, then further processing will enhance operational profits.
A)True
B)False
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Chapter 26: Capital Investment Decisions
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Q1) The payback period and accounting rate of return (ARR)methods are suitable to investments with a short time span.
A)True
B)False
Q2) When evaluating a potential investment, managers should use more than one measure for making a sound investment decision.
A)True
B)False
Q3) Which of the following two methods are typically used for initial screening of investments, rather than for detailed, in-depth analysis?
A)payback and accounting rate of return
B)net present value and payback
C)internal rate of return and net present value
D)accounting rate of return and net present value
Q4) Which of the following is a capital budgeting method?
A)return on assets
B)net present value
C)inventory turnover
D)return on equity
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